The present invention generally relates to real estate mortgages and, more specifically, to a product, system and method for providing an integrated data gathering, loan processing and closing service. All data gathered using the method of the present invention is closely controlled and the method results in a closed mortgage loan transaction which is protected by a consolidated certification of the loan process.
As illustrated in FIG. 1, the traditional, prior art mortgage process includes the following three main stages: Marketing 2, Loan Production 4 and Servicing 6.
The Marketing stage 2 consists of a variety of activities that focus on acquiring new customer business. Methods of traditional marketing include direct contact with real estate agents and other potential advisors who can direct a buyer to a specific lender as well as direct to customer strategies including postal mail campaigns, web advertisement and mixed-media commercials.
The Servicing stage 6 consists of collecting monthly mortgage principal and interest payments from homeowners, managing escrow accounts for paying taxes and homeowners' insurance premiums, overseeing foreclosure and loss mitigation procedures when borrower's are unable or unwilling to repay as well as remitting principal and interest payments to secondary market investors or security holders.
The present invention primarily relates to the Loan Production stage 4. The objectives of the Loan Production stage 4 are to qualify a customer for a loan program, collect all necessary information with regard to the proposed loan, assess the lender's risk relative to the loan and finally close the loan. As illustrated in FIG. 1, the Loan Production stage includes the Pre-Qualification phase 8, Loan Processing phase 10, the Underwriting phase 12, the Closing phase 14 and Post Closing phase 16.
Prior to moving to the Loan Processing phase, a potential borrower is typically “pre-qualified” by the lender. The Pre-Qualification process step 18 consists of a brief and typically automated review of credit information, data provided by the potential borrower via an application form (including information related to income, debt and assets), the purpose of the mortgage and the value of the subject property (that serves as the collateral for the loan).
During the Pre-Qualification process step, a credit report, as indicated at 21a, is typically ordered from a settlement services provider. The settlement services provider generates the credit report 21b and provides representations and warrants 21c for the credit data in the report. In addition, borrower information and information on the subject property (such as the property address, etc.) is provided at 22. The property information is used to order an Automated Valuation Model (“AVM”) valuation of the subject property, as indicated by blocks 24a and 24b. As illustrated at 24c, representations and warrants are also provided by the AVM service provider for the data in the AVM report. The data of the credit and AVM reports is then reviewed, as indicated by blocks 21d and 24d by the lender.
The Preliminary Loan Risk Assessment 20 is then performed by the lender evaluating the credit score of the borrower, payment history, outstanding debts, liquid and non-liquid assets as well as assumed subject property value. If the risk level of the loan is acceptable to the lender, the loan progresses to the Loan Processing phase 10.
The Loan Processing phase 10 primarily entails verifying employment, income, asset, debt and other information provided by the borrower, and ordering of settlement products including, but not limited to, flood determination and insurance products, appraisal, and title information for the subject property.
During the Loan File Assembly process step 26, the loan package is assembled for underwriting review and determination. As part of the assembly, an appraisal or valuation of the subject property is ordered 28a, generated 28b and insured by the valuation service provider 28c. Finally, the valuation data is reviewed 28d before being added to the loan file by the lender. A title search and flood report (also for the collateral/subject property) are also ordered, generated, insured (by the responsible service provider) and reviewed as indicated at 32a-32d and 34a-34d, respectively, before being added to the loan file by the lender.
The required loan package documentation is determined by loan program, investor and regulatory guidelines. The documentation collected consists of information that substantiates the borrower's willingness and ability to repay the obligation and identifies any potential risk in the collateral/subject property securing the loan. The documentation that has been collected up to this point is critical to the salability of the loan to an investor as well as to validate the viability of the loan. Any significant defects in the loan documentation may prohibit an investor from purchasing the loan from the originating lender or result in the repurchase of the loan by the originating lender in the event that the borrower fails to repay the obligation.
The objective of the Underwriting phase 12 is to make a final assessment in respect to the credit and collateral risk of the proposed loan. During the Underwrite Loan file step 36, an underwriter and/or automated underwriting system will review pertinent borrower and collateral/subject property information, using lender rules 38a, regulatory rules 38b and investor rules 38c, and provide the appropriate underwriting determination.
The outcome of the underwriting review typically results in the following determinations: Approved, Approved with Conditions or Declined. When loans are approved with conditions, the verification process will usually continue with the understanding that further supporting documentation is required prior to closing the loan or, in some cases, before the underwriter is willing to approve the loan for closing. In many cases, a declination will result in changing loan parameters (e.g. loan program, perhaps an adjustable rate mortgage with a low initial interest rate, down payment amount, obtaining gift funds, combining a first and second mortgage, etc.), which may allow the borrower to qualify.
Upon approval, additional documentation may be collected during the Underwriting phase 12 to fulfill certain underwriting requirements or stipulations as well as other documentation such as proof of property and casualty insurance on the subject property which may be required prior to closing and funding the mortgage loan.
During Close step 42 of the Closing phase 14, an integrated package of loan processing and document delivery systems will prepare the necessary legal and disclosure documents to be available for the closing of the real estate transaction. More specifically, the closing documents will be ordered 44a and generated 44b. Representations and warrants will be provided for the closing documents, as indicated by 44c, by the service provider and the closing documents are reviewed by the lender 44d. 
During the Close step 42 of the Closing phase 14, the closing service is ordered 46a. The closing service 46b and signature service 46c essentially coordinate the execution of the loan agreement, provide the borrower(s) with required disclosure information and manage the collection and disbursement of funds to all of the parties involved in the loan transaction. The coordination of involved parties may include a real estate seller, real estate agents, third party service providers, local government agencies, lien holders and lenders. The closing agent will also ensure that any title issues are resolved prior to the closing of the loan to ensure the appropriate lien position of the loan. As such, the closing agent also provides representations and warrants, as indicated at 46d. 
The Post-Closing phase 16 includes the Post-Close step 48 during which the post-closing service is ordered 52a and provided 52b by a post-closing service provider. During this step, the loan is prepared for the investor and loan servicer. This phase also reviews the loan to ensure that appropriate investor and regulatory guidelines were met and the loan package is salable in the secondary market. The post-closing service provider therefore provides representations and warrants as indicated at 52c. The final contract documents ultimately are housed in a servicing data file 54 for access at a later period in time.
As is clear from the above, the following attributes characterize the traditional, prior art mortgage process of FIG. 1: misalignment of incentives, fragmented data acquisition, fragmented decisioning, fragmented insurance/assurance and asynchronous quality control.
Misalignment of incentives permeates the entire prior art loan production process. Loan officers, real estate agents, loan processors, appraisers and various third party providers are under extreme pressure to complete each and every transaction. This pressure is exacerbated by the previously described process fragmentation and complexity resulting in a high frequency of misrepresentation or in some cases fraudulent activity. The traditional process, relying on multiple data providers with varying degrees of pressure to “perform” from the perspective of the lender leads to significant opportunity and motivation on the part of these providers to misrepresent information and possibly engage in fraud. In addition, fragmentation also allows organized groups to design and execute complex, well-designed schemes that exploit these weaknesses.
Fragmented data acquisition is an attribute of the mortgage process of FIG. 1 in that the current risk assessment, data acquisition and service product ordering process is distributed throughout the loan origination lifecycle and is dependent upon multiple sources (service providers) which may or may not be completely trusted. Loan prequalification products are typically ordered at the point-of-sale with other products, such as flood, appraisal, title and closing, that are ordered during the loan processing phase. Further products are also ordered during the closing phase, such as document preparation services and signing services. This fragmented acquisition and ordering process adds time and cost to the process as well as making it very difficult for a lender to manage vendor performance, data accuracy or maximize process efficiencies and product cost.
Fragmented decisioning also occurs in the mortgage process of FIG. 1 in that the process requires a variety of critical decisions to be made throughout the loan origination lifecycle based on limited data sets. A pre-qualification decision is made at the point-of-sale with just the credit data. A decision is made on the risk associated with the collateral value with just the appraisal/automated valuation model (“AVM”) at a different point in time. Similar fragmented decisions are made essentially every step of the process. Not only is the process inherently inefficient from a time/cost perspective but the decisions are sub-optimal as they are not based on the complete data set and an understanding of the interplays between various data items.
Fragmented insurance/assurance occurs in the mortgage process of FIG. 1 in that investors typically require a variety of assurance and insurance agreements for various aspects of the loan transaction. All of the assurance and insurance components are managed separately with separate coverage boundaries, representations and warrants. Examples include: title insurance, mortgage insurance, hazard insurance, collateral valuation insurance and assurances, document preparation assurances, closing assurances, credit data assurances, flood data assurances and tax data assurances. This does not allow the lender to have a single vendor for accountability when issues arise around a loan and makes it difficult to optimize the insurance/assurance coverage to the real risk. The investor relies upon the lender to provide the primary representations and warrants with the lender subordinating these risks in this fragmented design.
Asynchronous quality control exists in the mortgage process of FIG. 1 in that quality control activities typically occur post-closing and/or just prior to funding. In most cases pre-funding quality control activities only occur on a minority of loans. Not only does this result in an inefficient process but also results in erroneous closings with potentially increased losses to the lender.
Accordingly, it is an object of the present invention to provide a new consolidated product, method and system for certifying the closing and mortgage loan fulfillment.
It is another object of the present invention to provide a closing and mortgage loan fulfillment certification product, method and system that eliminates fragmented data acquisition.
It is another object of the present invention to provide a closing and mortgage loan fulfillment certification product, method and system that eliminates fragmented decisioning.
It is another object of the present invention to provide a closing and mortgage loan fulfillment certification product, method and system that eliminates fragmented insurance/assurance.
It is still another object of the present invention to provide a closing and mortgage loan fulfillment certification product, method and system that controls the data utilized in the mortgage loan production process.
It is still another object of the present invention to provide a closing and mortgage loan fulfillment certification product, method and system that integrates data integrity procedures eliminating asynchronous quality control.
It is still another object of the present invention to provide a closing and mortgage loan fulfillment certification product, method and system that significantly diminishes or eliminates the opportunity for misrepresentation and fraud.
These and other objects and advantages will be apparent from the following specification.